The benevolent curiosity that greeted the launch of Abenomics demands an analytical review. Prime Minister Shinzo Abe’s recipe, launched at the end of 2012, has lost its shine, having been called back to reality by the harshness of facts. His famous three arrows (monetary policy, fiscal policy, and growth reforms) have failed to hit their targets or lost speed, changing course to survive. The GDP’s results confirm this, which was exactly what the premier wanted to revitalize. After a year and a half, GDP growth was equal to 1.4%, only a couple decimals superior to the rates recorded by Japan over the past decade of stagnation. People are wondering whether such a radical and onerous change of direction in economic policy was worth it. Financial offices greeted Abenomics optimistically. The government taking responsibility for reinvigorating demand seemed not only necessary given the international crisis, but also confirmation that the FED’s expansionist policies found a consenting shore. Only the Eurozone remained nailed down by restraints that didn’t favor growth. For the Japanese economy—still the third largest in the world—it was a Copernic revolution: supplying resources directly because the bulk of demand—both consumption and investments—wasn’t drinking despite the clean, available, and economical water. Deflation seemed to be a sinister enigma: why spend money when it’s worth more tomorrow? The government meant to take on direct responsibilities, hoping that the frightening Japanese public debt (240% of the GDP) would remain in Japanese hands and therefore not in demand. Japan, therefore, seemed to be in a promising position. This inspired Osservatorio Asia to dedicate the next convention on November 13 to the Japanese model. Effectively, the news is important, but it must be accompanied by initiatives that are lacking and objectively hard to undertake at the moment. Stephen Roach, a Yale professor and the ex-president of Morgan Stanley in Asia, believes that the solution for growth must come from both sides: an increase in productivity and the search for new forms of demand, both internal and external. The first path is challenging: the island chain is already at the global forefront of sophisticated technology, services, and the modernity of industrial sectors. It can certainly improve its structure, but not by spectacular leaps and bounds. Internal demand can be stimulated with the introduction of a new work force. In any case, Tokyo has been very slow to adopt measures to favor the employment of women, which remains the lowest in the industrialized world. Even less progressive are its programs to encourage immigration, a theme that remains a cornerstone in Japanese society. There’s no choice but to insert it into the rebalancing underway in the Pacific between China and the US. Past deficits—measured by Washington’s enormous disadvantage toward Beijing—are in the process of being reshaped, or at least their intentions are. China has launched tense policies to stimulate internal consumption and imports. Furthermore, it needs to acquire the best technology for its productive apparatus. Japan is in the best position to find outlets for its offerings. In any case, political friction won’t allow the relations between the two Asian capitals to improve. Exchange of merchandise persists, but not at a level capable of stimulating demand in the two countries, especially Japan. Even if in small measure, the US can also help Japan because the hopes for new investments and construction finds in Tokyo a quality provider, a position that would certainly not have been possible if Washington continued to favor low-value imports, like those from Beijing. Therefore, Abenomics is still valid, the premise is not denied, and the successes weren’t random. But, in order to be successful Japan probably needs more effective and courageous policies. The splendid results of the past do not guarantee the future and time, as is frequently taught in Asia, is not an unlimited resource.

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About Alberto

Alberto Forchielli, born in 1955, received an MBA with honors from Harvard Business School and a bachelor’s cum laude in Economics from the University of Bologna. He is a founding partner of Mandarin Capital Partners, and the founder and president of Osservatorio Asia, a non-profit research center focused on Asia. He is also the founder of T-Island, a consultancy agency specialized in international relocations for professionals. In addition, he guided the expansion of the Roland Berger Foundation to Italy, which provides individual support for talented students lacking means to further their educations.